Nomura (8604) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nomura (Japan)

Based on various researches at Oak Spring University , Nomura is operating in a macro-environment that has been destablized by – technology disruption, central banks are concerned over increasing inflation, increasing commodity prices, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, there is increasing trade war between United States & China, wage bills are increasing, etc

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Introduction to SWOT Analysis of Nomura

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nomura can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nomura, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nomura operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Nomura can be done for the following purposes –
1. Strategic planning of Nomura
2. Improving business portfolio management of Nomura
3. Assessing feasibility of the new initiative in Japan
4. Making a Investment Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nomura

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Strengths of Nomura | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Nomura are -

Ability to recruit top talent

– Nomura is one of the leading players in the Investment Services industry in Japan. It is in a position to attract the best talent available in Japan. The firm has a robust talent identification program that helps in identifying the brightest.

Superior customer experience

– The customer experience strategy of Nomura in Investment Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Strong track record of project management in the Investment Services industry

– Nomura is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Successful track record of launching new products

– Nomura has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nomura has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

Analytics focus

– Nomura is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Investment Services industry. The technology infrastructure of Japan is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Low bargaining power of suppliers

– Suppliers of Nomura in the Financial sector have low bargaining power. Nomura has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nomura to manage not only supply disruptions but also source products at highly competitive prices.

Innovation driven organization

– Nomura is one of the most innovative firm in Investment Services sector.

Cross disciplinary teams

– Horizontal connected teams at the Nomura are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Highly skilled collaborators

– Nomura has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Investment Services industry. Secondly the value chain collaborators of Nomura have helped the firm to develop new products and bring them quickly to the marketplace.

High brand equity

– Nomura has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nomura to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Ability to lead change in Investment Services

– Nomura is one of the leading players in the Investment Services industry in Japan. Over the years it has not only transformed the business landscape in the Investment Services industry in Japan but also across the existing markets. The ability to lead change has enabled Nomura in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Effective Research and Development (R&D)

– Nomura has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nomura staying ahead in the Investment Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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Weaknesses of Nomura | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Nomura are -

Lack of clear differentiation of Nomura products

– To increase the profitability and margins on the products, Nomura needs to provide more differentiated products than what it is currently offering in the marketplace.

Slow decision making process

– As mentioned earlier in the report, Nomura has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Investment Services industry over the last five years. Nomura even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

Slow to strategic competitive environment developments

– As Nomura is one of the leading players in the Investment Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Investment Services industry in last five years.

Increasing silos among functional specialists

– The organizational structure of Nomura is dominated by functional specialists. It is not different from other players in the Investment Services industry, but Nomura needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nomura to focus more on services in the Investment Services industry rather than just following the product oriented approach.

Capital Spending Reduction

– Even during the low interest decade, Nomura has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Investment Services industry using digital technology.

Compensation and incentives

– The revenue per employee of Nomura is just above the Investment Services industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

High cash cycle compare to competitors

Nomura has a high cash cycle compare to other players in the Investment Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

High bargaining power of channel partners in Investment Services industry

– because of the regulatory requirements in Japan, Nomura is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Investment Services industry.

Ability to respond to the competition

– As the decision making is very deliberative at Nomura, in the dynamic environment of Investment Services industry it has struggled to respond to the nimble upstart competition. Nomura has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Low market penetration in new markets

– Outside its home market of Japan, Nomura needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Skills based hiring in Investment Services industry

– The stress on hiring functional specialists at Nomura has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

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Nomura Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Nomura are -

Using analytics as competitive advantage

– Nomura has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Investment Services sector. This continuous investment in analytics has enabled Nomura to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nomura to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Developing new processes and practices

– Nomura can develop new processes and procedures in Investment Services industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nomura can use these opportunities to build new business models that can help the communities that Nomura operates in. Secondly it can use opportunities from government spending in Investment Services sector.

Learning at scale

– Online learning technologies has now opened space for Nomura to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Reconfiguring business model

– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Nomura to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Nomura can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Nomura to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Nomura in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Investment Services industry, and it will provide faster access to the consumers.

Buying journey improvements

– Nomura can improve the customer journey of consumers in the Investment Services industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Low interest rates

– Even though inflation is raising its head in most developed economies, Nomura can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Manufacturing automation

– Nomura can use the latest technology developments to improve its manufacturing and designing process in Investment Services sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Investment Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nomura can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Nomura can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

Leveraging digital technologies

– Nomura can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Creating value in data economy

– The success of analytics program of Nomura has opened avenues for new revenue streams for the organization in Investment Services industry. This can help Nomura to build a more holistic ecosystem for Nomura products in the Investment Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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Threats Nomura External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Nomura are -

New competition

– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Nomura in the Investment Services sector and impact the bottomline of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Nomura in Investment Services industry. The Investment Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

High level of anxiety and lack of motivation

– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Nomura needs to understand the core reasons impacting the Investment Services industry. This will help it in building a better workplace.

Consumer confidence and its impact on Nomura demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Investment Services industry and other sectors.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Nomura may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Investment Services sector.

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Nomura business can come under increasing regulations regarding data privacy, data security, etc.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Nomura can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Nomura prominent markets.

High dependence on third party suppliers

– Nomura high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Investment Services industry are lowering. It can presents Nomura with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Investment Services sector.

Environmental challenges

– Nomura needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Nomura can take advantage of this fund but it will also bring new competitors in the Investment Services industry.

Instability in the European markets

– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Nomura will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

Technology acceleration in Forth Industrial Revolution

– Nomura has witnessed rapid integration of technology during Covid-19 in the Investment Services industry. As one of the leading players in the industry, Nomura needs to keep up with the evolution of technology in the Investment Services sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

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Weighted SWOT Analysis of Nomura Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nomura needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of Nomura is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of Nomura is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of Nomura to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Nomura needs to make to build a sustainable competitive advantage.

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